COMMISSIONER OF INCOME TAX Vs. RAMNIK LAL KOTHARI

JUDGEMENT

(1.) IN this case the assessee was assessed to tax in the status of an individual. He had no independent business of his own, but he was deriving income form various firms of which he was a partner. For the asst. year 1955 -56 the assessee declared an income of Rs. 77,027 and for the asst. year 1956 -57 the assessee declared an income of Rs. 53,340 with regard to the four firms of which he was a partner. As against these share incomes the assessee claimed expenses of Rs. 12,283 in the first year and Rs. 19,380 in the second year. Both these amounts of expenses included items of interest of Rs. 1,935 in the first year and Rs. 1,956 in the second year. These amounts of interest were paid by the assessee to the bank named Virjee and Company from which the assessee had borrowed money to finance the partnership firms. With the exception of these items of interest the ITO disallowed the other expenses. The order of the ITO was affirmed by the AAC in appeal. The assessee took the matter in second appeal before the Tribunal which held that the profits and gains earned from a partnership were to be taxed as business income in the hands of the assessee who was entitled to claim all the deductions which are permissible under S. 10(2) of the IT Act. The Tribunal accordingly ordered that the assessee was entitled to have the expenditure incurred by him in earning his income from the firms allowed in his personal assessment. The Tribunal accordingly remanded the matter to the ITO for examining the nature of the expenses alleged to have been incurred by the assessee in order to earn his income from the firms and to deduct the same in computing his income.

(2.) AT the instance of the CIT the Tribunal has submitted the following question of law for the opinion of the High Court under S. 66(1) IT Act :

(3.) FOR these reasons we hold that the question of law referred to the high Court by the Tribunal must be answered in favour of the assessee and against the Department. The assessee is entitled to the costs of the reference. Hearing fee Rs. 250.